Threats to life insurance companies

The International Monetary Fund is concerned about the persistence of low bond yields on life insurers.
Crédit photo: IMFIMF headquarters, Washington DC

The latter are investing heavily in State-owned bonds deemed safe but whose return does not exceed 1%. Yet, life insurance contracts are benefiting from higher rates.

This gap is the more alarming to IMF as it is poised to linger on. The international body announced that 24% of life insurance companies would not be able to meet the solvency requirements if this scenario goes on.

On the other hand, rising interest rates would force insurers to cede these bonds at loss. It will also scare away savers who will be rushing toward other competing financial products.

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